The ability for SMSFs to refund non-concessional contributions cap (NCCC) breaches when the yearly $180,000 limit was exceeded would be a more practical application of the rule, according to a superannuation industry technical expert.
“I think the trigger around $180,000 would be a better solution because there would be individuals who would inadvertently go over that amount with no intention of bringing forward their contributions,” AMP SMSF head of policy, technical and educational services Peter Burgess told selfmanagedsuper.
“In fact, you may have people over the age of 65 who can’t bring forward their contributions anyhow, so in their world if they go over $180,000, that would be an automatic sort of situation.
“For those under the age of 65 I would have thought it would be better to pitch it at the $180,000 level rather than the $540,000.
“And reading between the lines, I think that’s what is intended. My interpretation of what they said in the budget papers would suggest that.”
The federal government announced in the 2014 budget that breaches of the NCCC would be refundable by trustees in the same way excess concessional contributions can be refunded.
However, no indication has been given as to whether the refund would apply to amounts in excess of the yearly NCCC of $180,000 or only to those amounts that exceed the three-year bring-forward cap of $540,000 triggered by initial $180,000 limit breaches.
Clarification is still also being sought over how the income earned as a result of these contributions cap breaches will be determined to enable the tax liability on this revenue to be calculated.
